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Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1704
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I moved to the US three years ago but only recently discovered

Customer Question

I moved to the US three years ago but only recently discovered that I had to file an FBAR if I have money worth more than $10 000 in a foreign account, so we never filed them.

Also, my capital gains and interest income where taxed at a higher rate than here in Germany and, since they were already taxed I did not include them in the US tax return.

The good news is that most of the capital gains and interest income would not need to be taxed here, as they have already been taxed in Germany. Therefore I owe the IRS not tax and I hope that they won't penalize me for not having files fbars.

One of my concerns is that maybe, since I have not looked into every detail of this, I actually do end up owing them 200-400$ of tax. Would that mean I would have to enter the offshore voluntary disclosure program?

What if I don't enter that program and the IRS finds out through the fbar that I file this year that I do owe $400 in tax. Would the just asked me to pay that money plus penalties or would they also file criminal charges against me for not paying taxes (even though I did not know I had to pay them)?

My gut feeling is to just begin filing the FBARs normally now. If they find out that I do own $400 in tax, I trust that the US law system is fair enough to not prosecute me for such a small amount.

My worries are:
Let's say they determine that I hid $400 taxes from them. Would I have to go to court for that?
If I file that FBAR, they might have a million questions about whether the capital gains from those were short term or long term, etc. It's really hard for me to find that out because my German bank did not discern between those capital gains. How likely is it that I have to prove my claims with all that paperwork and how likely is it that I can just sign a letter starting how I believe things are, and they'll be satisfied with it?

Finally, how do you suggest I move forward? Am I in so deep doodo that I should try to hide some of those accounts, or do you think I could get clean with the IRS with reasonably little effort and therefore just file the FBARS normally?
Submitted: 1 year ago.
Category: Tax
Expert:  Barbara replied 1 year ago.

Welcome and thank you for giving me the opportunity to assist you with your tax question.

 

As to your failure to file the appropriate FBARs, the following is information pertaining to penalties:

 

There are two types of penalties applicable to FBARs - (1) Non-Willful and (2) Willful. It should be noted that the penalties are assessed per account and not per FBAR. Additionally, the penalties are assessed for each year there is a violation. For
example, if you have 5 accounts that have not been reported for 5 years, there
could be 25 separate penalties assessed. The penalty regime for violations after
October 22, 2004 can be summarized as follows:

Non-Willful Penalty

 

Up to $10,000 for each negligent violation

No Criminal Penalties Assessed

 

Willful Penalty

Up to the greater of $100,000 or 50% of the amount in the account at

the time of the violation

Criminal Penalties of up to $250,000 or 5 years in jail or both

 

Willful Penalty While Violating Certain Other Laws

Up to the greater of $100,000 or 50% of the amount in the account at

the time of the violation

Criminal Penalties of up to $500,000 or 10 years in jail or both

 

While the penalties can be overwhelmingly high, there have been a host of
Voluntary Disclosure Programs offered by the IRS that can potentially reduce or
even eliminate the penalties noted above.

 

Since your initial failure to file the FBARs seems to not be willful, my best advice would be to file them and all other information with the IRS as soon as possible because you know they should have been filed. It is always much better to furnish information to the IRS on a voluntary basis rather than waiting for the IRS to come after you.

 

Please let me know if you require additional information or clarification. Thank you.

Customer: replied 1 year ago.

While the maximum account balance was quite high ($25k), the owed tax might only be $200-400. Do you think it is likely that I'll have to pay $12.5k in penalties for a non-willful failure to disclose $200-400 in taxes? What is the penalty you expect they will assess?

Customer: replied 1 year ago.
Relist: Other.
I was not satisfied with the credentials of the answerer. Also, the tax preparer was offline when I had a follow-up question.
Expert:  Barbara replied 1 year ago.

I apologize for the delay; however, I responded to your question at 7:01 am today when you were offline. I have had appointments since that time and now have a break.

 

I gave you the information regarding what the penalty would be, but I cannot advise you how much of a penalty the IRS will assess. It has been my experience that the IRS is usually more understanding of persons who come forward with mistakes/oversights rather than waiting for the IRS to catch those mistakes/oversights. My concern is that you advised in your original question that there are multiple years involved.

 

Thank you.

Expert:  Anne replied 1 year ago.
Hi

Different expert here, and I will be happy to help you today. However, there is no guarantee that I, or ANY expert can promise you that we will be online if you have a follow up question. We do all check back as often as we can, and we all welcome the opportunity to assist you.

I have some questions that I need to ask so that I know exactly what your situation is so that I can better help you.

You stated you came to the US 3 years ago from Germany.....are you here on a visa? if so, what kind?

I'm assuming that you are still a citizen of Germany, since you spoke of paying your taxes to Germany. Is this correct?

Once I have the answers to these questions, then I will know how best to help you
Customer: replied 1 year ago.

Thank you for chiming in, Anne. I now understand that I need to give you a bit more time. I was panicking cause the FBAR deadline is June 30th...


 


I came at the end of 2009 on a spouse-green card when I married my U.S. wife.


 


I'm a German citizen.


 


 

Expert:  Anne replied 1 year ago.
Ok....thank you for that additional information. I was wondering if you were a Non Resident Alien, and I see you're not.

Sometimes we experts work together and every thing that the original expert (referenced below) told you IS correct.

Whether or not the IRS will issue that penalty is not something we can ever answer.

Please be sure to accept the FIRST (bkb1956) expert's answer since this was one of those times when we worked together. I stepped in basically to explain about the timing issue.

Thank you very much for using justanswer.
Customer: replied 1 year ago.

I was really hoping to speak with someone who, from experience, can say how likely it is that they will assess that penalty. I was hoping by giving you an idea of the amount of money involved you'd be able to refer me to similar cases that you've handled in the past, and what the outcome was in those cases.


 


Although I very much appreciate you help, I'm not satisfied with the answer I received.

Expert:  Anne replied 1 year ago.




The IRS could assess penalties for your past failure to file FBARs, but you could contest the penalties. Moreover, if you reported all income from your foreign account(s) or wouldn’t owe additional taxes even if you had (for example, because of foreign tax credits), you should file an FBAR.

if you don’t owe additional taxes, filing past due FBARs with an explanation is often advisable to clean up the past. If you didn’t disclose the accounts on your tax returns, owe taxes from the past, and didn’t file FBARs, you face a far tougher choice.

 

However,

Although it has been my pleasure to answer your questions, please remember to pay the original expert.

Expert:  Anne replied 1 year ago.


I apologize that I got cut off.in mid sentence.

 

You asked us what the penalties were for not filing your FBAR in prior years, and that's what we answered.

 

You mentioned you were not "in the program" As far as I can tell, there is still an amnesty program....see below:


IRS Announces Efforts to Help US Citizens Overseas Including Dual

 

Again, please make your payment to the first expert .

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